Various factions of House Republicans are threatening the future of a massive tax reform bill that reduces tax rates by ending popular deductions, which has already delayed the GOP's rollout of the tax bill and could threaten its passage.
Republican tax writers Wednesday were huddled under green-shaded banker’s lamps, trying to get the tax reform formula just right for a promised Thursday rollout.
The big reveal was delayed one day after Republicans could not find a way to finance major tax deductions without blowing a hole in the nation’s deficit or losing too many GOP votes.
The biggest faction of potential “no” votes is still made up of New York and New Jersey lawmakers opposed to the elimination of the state income deduction.
This group of 14 Republican lawmakers can’t block the bill, and not all of them would vote against it. But combined with a smattering of other opposing Republican lawmakers, the faction could spell doom for the proposal.
Republicans can afford to lose only 22 votes and still pass the measure in the House.
“Unless most of New York and New Jersey are on board, the bill has a problem,” said Rep. Tom MacArthur, R-N.J. “Because there are outliers on a whole bunch of other issues where they will lose some votes. A vote here, two votes there. You can’t afford to lose the bulk of New York and New Jersey and still have a bill go forward.”
The list of other possible GOP grievances is varied. Some lawmakers, for example, don’t like a proposal to tax a greater share of contributions to the nation’s most popular savings plans.
Republicans are hoping to raise revenue by dramatically lowering deductions for 401(k) contributions, a move aimed at pushing people into less popular savings accounts where later withdrawals are not taxed.
Potential opposition could also come from lawmakers whose approval hinges on whether the bill allows for immediate expensing of company business purchase. And other lawmakers oppose the plan to tax the foreign profits of U.S. corporations.
“There are different groups fighting for different things and they don’t want to introduce a bill until they have some chance of passing it,” MacArthur said, explaining the delayed rollout.
Part of the reason the bill was postponed was because of the decision to maintain the property tax deduction. The move helped soften opposition from the New York and New Jersey coalition, but it cost hundreds of billions of dollars in offsets, which lawmakers are now looking to replenish.
Tax writers are considering a plan to cap property tax deductions at $10,000, which would give them some revenue.
MacArthur is not sure he supports the idea. He’s checking the property value of each house in his district, to see if enough homes would be eligible for the deduction, he said.
“I’m willing to accept the concept as long as it covers enough homes,” MacArthur said.
Rep. Lee Zeldin, R-N.Y., said he is pushing Republican tax writers to leave the deduction for property and local income taxes completely intact.
“We are not there yet as far as an agreement on this issue,” Zeldin said Wednesday.
Despite the frayed GOP support for the plan, Republicans were saying as of Wednesday afternoon that they plan to roll it out their tax legislation on Thursday and will hold a committee vote on the bill next week.
“We are working toward the conclusion,” House Ways and Means Committee Chairman Kevin Brady, R-Texas, told the Washington Examiner.
But Zeldin said the measure revealed tomorrow will probably change. Republican leaders, he said, assured him “this initial draft will not be the final draft.”
It may be an impossible balance for Republicans tax writers to strike, some experienced lawmakers suggested Wednesday.
“They made $4 trillion worth of promises,” Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, said, referring to the deficit total he believes the GOP tax cuts would create. “As of today, they have virtually no revenue to pay for those promises.”
Rep. Patrick McHenry, R-N.C., a top GOP vote-counter, said passage will ultimately depend on each member figuring out if their constituents will see lower tax bills.
The proposal would reduce individual rates, double the individual deduction and expand the child tax credit. It would propose phasing out the estate tax, lawmakers with knowledge of the plan said.
All of those provisions are appealing to Republican lawmakers. But it will depend whether the math adds up for their constituents, when the missing deductions are factored in.
“Everyone is in play,” McHenry said. “They want to see that their constituents are better off under our tax reform and tax cut. And if they are not better off, they are not for it, and if they are better off they will be for it. We have data to show they will be better off.”